Lawyers view on the Jordanian PPA Khaldoun Nazer Agenda What is - - PowerPoint PPT Presentation

Lawyer’s view on the Jordanian PPA

Khaldoun Nazer

Agenda

 What is the Jordanian PPA?

 Renewable Energy and Energy Efficiency Law  Development of the Jordanian PPA

 PPA Main Components – Developed Markets  Three Important Terms:

 Proper Risk Allocation  Project Finance  Bankability

 Walk through the Jordanian PPA  Our view on the Jordanian PPA

Not

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cover ers PPAs to be be signe ned with NEPCO CO

What is the Jordanian PPA

 Renewable Energy & Energy Efficiency Law 13/2012 (REEL)

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Regulates the development of Renewable Energy Projects in Jordan

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Interrelates with the General Electricity Law – provides the licensing and regulatory regime (generators, transmission and distribution)



REEL - Power Purchase Agreement (PPA) is part of the Project Agreements which will be signed once the project is approved.



REEL does not define a PPA nor does it stipulate any minimum requirements that must be covered in a PPA

 PPA under Jordanian Law is a contractual relationship that regulates

the sale and purchase of electrical power.

 Jordanian Law recognizes “Freedom of Contract” subject at all times

to Public Order and Mandatory Legal Requirements

What is the Jordanian PPA – Cont.

 Development of the Jordanian PPA



IPP 1 Conventional Generation (Gas, Diesel, HFO)

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IPP 2 Conventional Generation

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CGECO Privatization – PPAs for existing plants – Conventional Generation

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Bidding process relating to Al-Kamsha Wind Farm – PPA was based on IPPs (Conventional Generation)

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Bidding process relating to Al-Fujeij Wind Farm – PPA was based on negotiated Kamsha PPA



IPP 3 - Conventional Generation

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IPP 4 – Peaking Units of Existing Plants



Tafila Wind Farm PPA

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Solar Projects PPAs – Round 1 of Direct Proposals

PPA Main Components – Developed Markets

 Developed Markets define the PPA as a contract to buy the electricity

generated by the power plant and refers to the purchaser of the electrical power as the “Off-taker”

 PPA main components are:



Duration (typically ranging from 15 to 25 years)



Construction / Commissioning / Interconnection



Sale & Purchase of Electrical Power



Curtailment (by Project Developer / by Off-taker)



Proper Risk Allocation (Project Developer’s Risks and Off-takers Risks)



Insurance



Default and remedies



Environmental Attributes / Credits

Three Important Terms

 Development/Promotion

• f

Power Generation Projects entails understanding and comprehending the following Three Important Terms:

 Proper Risk Allocation: Risk Matrix Process (Risk Identification,

Assessment, and Allocation)

 Who is the party that will deal with the consequences of each

risk?

 Risk to be assumed by the party that is best placed to manage

such risk.

 Construction and operation of facility is typically developer’s risk  Legal Risks (such as changes in law)

and political risk is Government’s risk

 Insurable risk is assumed by the party that is able to insure it.

Three Important Terms – Cont.

 Project Finance

 Project’s feasibility is liked to ability to attract equity and debt  Debt usually ranges from 70% to 90%  Equity portion is important to ensure developer’s commitment  Project Finance is defined as “long term financing with non-

recourse or limited recourse where debt and equity used to finance the project are paid back from the project’s cash flow”.

 Project’s cash flow is the principle source of security to lenders.  Lenders and developers are looking at clarity as to the project’s

cash flow

 Risks affecting the project’s cash flow must be managed

properly in order to ensure ability to attract equity and debt

Three Important Terms – Cont.

 Bankability:

 Continuously used term  No set definition  No list of requirements to achieve Bankability  A project is considered Bankable if lenders are ready to finance

the project on Project Finance basis (limited or non-recourse basis) A couple of banks in Jordan have Project Finance experience. Other banks are working on developing such practices. Active players include IFC, EIB, EBRD ….. etc

Walk through the Jordanian PPA

 The Jordanian PPA – Boiler Plates

 Long Term Agreement (20 Years after COD)  NEPCO’s payment obligations are guaranteed by the Government

• f Jordan.

 Signing up to Financial Close



Mainly developer to work

• n

procuring the generation license, the environmental approvals (EIA Report) and the financing needed for the Project’s debt (PPA Direct Agreement and Guarantee Direct Agreement).

 Financial Close up to COD



Construction of Facility and Interconnection Facilities



Construction of Substation



Commissioning (Independent Engineer, Tests, Sale of Power during tests, delay in commissioning and deemed commissioning)

Walk through the Jordanian PPA – Cont.

 COD onwards, developer to operate and maintain the facility

pursuant to:



Laws of Jordan;



Transmission system Grid Code



Generation License and other authorizations



Prudent Utility Practice



Operating Protocol and Access Protocol

 Sale and Purchase of Power  Curtailment of Delivery  Major Maintenance activities and maintenance in Emergency

situations.

Walk through the Jordanian PPA – Cont.

 Metering, disputes on metering and un-availability of meters’

reading

 Invoicing, late payments and disputed payments  Emission Reduction Credits  Insurance  Force Majeure (Government FM Events and Other FM Events)  Prolonged FM Events (No termination for Prolonged Government

FM Events)

 Total / Partial Loss – Restoration  Change in Law Protection – (one time vs. ongoing)  Default, Termination and Consequences of Termination

Walk through the Jordanian PPA – Cont.

 Relationship with lenders (Direct Agreements, Notices, Step-in

Rights, Assignment…. etc).

 Dispute resolution: Expert (certain technical issues) and Arbitration

per ICC Rules in London.

 Applicable Law is Jordanian Law  Restrictions on transfer of shares in Project Company (no-rationale)  Decommissioning (no-rationale on private lands)

Walk through the Jordanian PPA – Cont.

 Jordanian Law Issues

 FM Events under Jordanian Law – Jordanian Civil Code  Liquidated Damages and Agreed Compensation vs. Actual

Damages

 Ability to charge Default Interest on Late Payments  PPA Not Tested: No Precedents on application of Jordanian

Law on Disputes

Our view on the Jordanian PPA

 Fairly developed given MEMR’s/NEPCO’s experience in IPPs  Covers the main components identified in Developed Markets PPAs  Needs refinement in certain areas such as:



Risk to lenders relating to Total Debt Outstanding if PPA is terminated for reasons

• ther than NEPCO Event of Default (Single Buyer Model in Jordan)



No termination for prolonged Government FM Events



No recovery of additional costs incurred by Project Company when operating under Government FM Events



Other FM Events – must distinguish between those affecting NEPCO and those affecting Project Company as those affecting NEPCO cannot be insured by Project Company.



Land related risks for projects located within identified areas (Maan Development Area and Mafraq Development Area)



Compensation for NEPCO EoD to provide return on Equity

Questions & Answers

Thank you Khaldoun Nazer

Amman – Jordan Tel: +962 6 5664750 Email: info@khalifehlaw.com khn@khalifehlaw.com